For many Koreans who attended elementary school in the 1960s, the smell of cornbread baking at school remains a vivid memory. Made with corn flour provided through foreign assistance, the bread helped feed children whose parents struggled to provide lunch. For some, it made school something to look forward to.
Korea's GNI per capita in 1960 was $158, according to World Bank records. On Tuesday, the Bank of Korea reported that GNI per capita could exceed $40,000 this year. A country once dependent on overseas donors has become a donor and a major industrial economy. We have good reason to be proud.
But I keep returning to one question: Are we doing enough to preserve the conditions that made this transformation possible? What will our children inherit from the prosperity we enjoy today?
The proposed 820.9 trillion won (about $610 billion) 2027 budget should answer that question. We must assess the durability of its revenue and the priorities it serves. Policies aimed at immediate popularity should give way to investments that strengthen future earning capacity and national security.
The economic reasons for caution are straightforward. Semiconductors accounted for about 24.4 percent of merchandise exports in 2025. Their success is a national strength, but profits and related tax receipts remain vulnerable to shifts in AI investment, memory prices and trade policy. Korea needs a broader industrial base.
Exchange rates can increase dollar-denominated GNI without raising domestic wages. An income of 54 million won equals $40,000 at 1,350 won per dollar, but only $36,000 at 1,500 won per dollar. The paycheck remains unchanged. Crossing $40,000 does not guarantee lasting prosperity or reveal what households have left after their bills.
Investment in AI, research and future industries deserves support. The government’s proposed reserves to buffer against revenue fluctuations acknowledge that exceptional receipts will not last. Lawmakers must assess whether those safeguards can sustain the commitments being made when economic conditions turn less favorable.
Two areas of the 2027 budget warrant particular attention.
First, health, welfare, labor and education together account for approximately 48.7 percent of proposed spending. Health, welfare and labor receive 289 trillion won, or 35.2 percent, while education receives 110.7 trillion won, or 13.5 percent.
Caring for children, senior citizens, and people with disabilities is a social responsibility. Education helped build modern Korea. These allocations cover essential services and longstanding obligations; their size alone does not indicate excessive spending. The generation that received school bread should understand what well-directed assistance can accomplish.
But new benefits, overlapping subsidies and ineffective programs deserve scrutiny before approval. Eligibility checks, audits and recovery of fraudulent payments should protect intended recipients. Enforcement must distinguish deliberate abuse from honest mistakes and keep assistance accessible to those entitled to it. Protecting public trust helps preserve welfare support.
Second, defense receives approximately 73.3 trillion won, or 8.9 percent of the budget, an 8.2 percent increase from 2026. It would account for 2.33 percent of forecast GDP. However, this allocation will not be sufficient to address urgent needs or sustain our combat capability amid ever-changing warfare.
Among all other needs, investment to retain experienced operators, capable officers and noncommissioned officers is the most urgent task. Personnel in the ROK Armed Forces are the single most important asset for maintaining our defense capability. We need to offer competitive pay, housing and career prospects to retain them, as these are becoming core components of combat capability. Policymakers should identify retention gaps and direct resources toward retaining the experience the military cannot quickly replace.
A dedicated defense industry fund should be considered, building on existing programs where possible. It should strengthen export supply chains and maintenance, repair and overhaul services, helping overseas buyers, such as Poland, receive support from Korean suppliers throughout the equipment's operating life. We also need dedicated funding for defense company R&D and operations to integrate into local supply chains in the US and Europe. Funding should be tied to viable demand and measurable results.
Given this backdrop, the government and lawmakers should consider a double-digit increase in defense spending to address urgent needs. Savings elsewhere must be identified and justified rather than assuming additional borrowing will cover the shortfall.
These commitments require reliable financing over many years. Defense deserves the same scrutiny of costs and performance as every other area of spending. The objective is greater readiness and a stronger industrial base, with public funds tied to demonstrated needs.
Our debates over welfare, budgets and political leadership can continue freely only as long as sovereignty is safeguarded. A credible defense strengthens Korea’s contributions to its alliance with the United States and to cooperation with other partners.
Economic freedom entails both individual and collective responsibilities. Governments change, but the consequences of their decisions endure. Neither prosperity nor security can be sustained by assuming favorable conditions will continue.
The children who once waited for school bread now have responsibilities of their own. Our parents helped us build lives they could scarcely imagine. We owe our children the same opportunity without imposing obligations we were unwilling to examine or the dangers we chose to overlook.
- - - - -
Man-Ki Kim
Man-Ki Kim is a professor at the KAIST Graduate School of Future Strategy, specializing in global public procurement, defense acquisition innovation and global strategic trends. He also serves as a senior adviser at Yoon & Yang LLC. The views expressed here are the writer’s own. -- Ed
khnews@heraldcorp.com
